Explain the various sources of financing. what is meant by security financing?
Answers
Equity financing - This refers to that part of capital which is raised by issuing shares and securities of a company. In such type of financing the person who buys these shares becomes the owner of the company. Debt financing - This refers to that part of capital which is borrowed from people for a fixed period of time. This amount has to be repaid and the person lending money becomes a creditor of the company. Lease financing - Money is raised by offering tangible assets like machinery, building etc under a lease agreement for specified period of time. In return the other party has to make lease payments annually, biannually or after regular intervals. Security financing - This type of financing is a kind of mortgage where an asset is kept as security with the creditor in return of funds.